Eighteen months before it entered administration, an insolvent company sold a van worth £15,000 to its director's brother for £1,000. The company could not pay its debts at the time. What is the position under section 238 of the Insolvency Act 1986?
Answer and explanation
Correct answer: A. The administrator may apply to court, as it was a sale at an undervalue within two years of insolvency onset
- Step 1: A transaction at an undervalue is one where the company receives significantly less than the value it gives.
- Step 2: The relevant time is two years before the onset of insolvency, and the company must have been unable to pay its debts then.
Answer
The administrator may apply to court, as it was a sale at an undervalue within two years of insolvency onset.
Why not the others: Six months is the lookback for preferences to unconnected persons; s238 covers administration and liquidation; connection is irrelevant to a section 238 claim.
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